CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

In terms of the Standards of Professional Conduct per Standard II (A) Material Non-public Information, which of the following pieces of information is considered to be material non-public?

I. A company plans on doubling its dividend.
II. The chairman of a company states that the company is going to double its profits by the beginning of the year.
III. An offer is going to be made for all the securities of a company.
A. I and II
B. II and III
C. I and III only
Explanation: The chairman of a company stating that the company is going to double its profits by the beginning of the year is a material fact but is not non-public.

User Contributed Comments 7

User Comment
jimcrock But surely II would be inside info if the market didn't know that the company would actually manage to meet expectations. I thought this was a bit unclear.
JZino Exceedingly unclear and, I believe, incorrect. Without *knowing* that the company would meet expectations there would be additional risk that would require compensation in the form of a higher RoR leading to a lower stock price.
armanaziz II does not seem to be material since it is already annouced.
DLUCFA I guess we were to have assumed that "stated by the chairman" = stated to the public in whatever form, rather than just "stated privately".

Agree with jimcrock and JZino - very unclear since we don't know for sure if expectations will be met. However, I think we're supposed to assume the more credible the souce, the higher the materiality.
mcspaddj Senior management makes bold statements a lot, and the fact on whether it is "certain" is irrevelant. However, I think the question should state to whom the chairman stated this information. If in a press conference, then I agree it's not non-public. But I was under the impression that it was stated to a room of analysts or in a conference call, thus still non-public.
gazza77 even if the chairman stated it in public. He said it a year ago, there is nothing to say that the chairmans statement would reflect the truth a year later. therefore the company's actual earnings are still material non public

I rest my case your honour
farhan92 i got this wrong (ethics after a long day of work doesnt help!) but gazza's explanation is bang on. If he had said it the day before the earnings were to be released then maybe it would have been a different story
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